Tax Law Changes Impacting 2022 Tax Returns

Here’s a look at what to expect when you file your 2022 tax return (taxes filed in 2023). 

No additional stimulus payments. Unlike 2020 and 2021, there were no new stimulus payments for 2022 so taxpayers should not expect to get an additional payment in their 2023 tax refund.

Child tax credit (CTC): the child tax credit reverted back to $2,000 per eligible child for the 2022 tax year.

Who Qualifies for CTC:
To be a qualifying child for the 2022 tax year, your dependent generally must:

• Be under the age of 17 at the end of the year
• Be your son, daughter, stepchild, eligible foster child, brother, sister, stepbrother, stepsister, half-brother, half-sister, or a descendant of one of these (for example, a grandchild, niece, or nephew)
• Provide no more than half of their own financial support during the year
• Have lived with you for more than half the year
• Be properly claimed as your dependent on your tax return
• Not file a joint return with their spouse for the tax year or file it only to claim a refund of withheld income tax or estimated tax paid
• Have been a U.S. citizen, U.S. national, or U.S. resident alien

You qualify for the full amount of the 2022 Child Tax Credit for each qualifying child if you meet all eligibility factors and your annual income is not more than $200,000 ($400,000 if filing a joint return). Parents and guardians with higher incomes may be eligible to claim a partial credit.

For the Earned Income Tax Credit (EITC), eligible taxpayers with no children who received roughly $1,500 in 2021 will now get $560 for the 2022 tax year. To qualify for the EITC, you must:

• Have worked and earned income under $59,187
• Have investment income below $10,300 in the tax year 2022
• Have a valid Social Security number by the due date of your 2022 return (including extensions
• Be a U.S. citizen or a resident alien all year
• Not file Form 2555, Foreign Earned Income
• Meet certain rules if you are separated from your spouse and not filing a joint tax return

The Child and Dependent Care Credit returns to a maximum of $2,100 in 2022 instead of $8,000 in 2021.

No above-the-line charitable deductions. During COVID, taxpayers were able to take up to a $600 charitable donation tax deduction on their tax returns. However, for the tax year 2022, taxpayers who don’t itemize and who take the standard deduction, won’t be able to deduct their charitable contributions.

After previously announcing a reduced threshold for 1099-K reporting for 2022 taxes, the Internal Revenue Service (IRS) announced in late December 2022 that this change will now take effect for 2023 — a one-year delay of the requirement for e-commerce companies to issue tax forms to customers with business transactions above $600.

Reporting requirements for Form 1099-K. Form 1099-K is issued by third party settlement organizations and credit card companies to report payment transactions made to you for goods and services.You must report all income on your tax return unless excluded by law, whether you received the income electronically or not, and whether you received a Form 1099-K or not.

Increased standard deduction:

For 2022, the standard deduction amount has been increased for all filers. The amounts are:

Increased alternative minimum tax (AMT) exemption: For the tax year 2022, the AMT exemption for individuals is $75,900 and $118,100 for married couples filing jointly. The alternative minimum tax only applies when the alternative minimum tax liability exceeds the regular federal income tax liability. With the current law, most households are not subject to AMT because of the large AMT exemption. The AMT was created back in the 1960s to prevent high-income taxpayers from avoiding individual income tax.

Itemized deductions: The following rules for itemized deductions haven’t changed much for 2022, but they’re still worth pointing out:

• State and local taxes: The deduction for state and local income taxes, property taxes, and real estate taxes is capped at $10,000.
• Mortgage interest deduction: The mortgage interest deduction is limited to $750,000 of indebtedness. But people who had $1,000,000 of home mortgage debt before December 16, 2017, will still be able to deduct the interest on that loan.
• Medical expenses: Only medical expenses that exceed 7.5% of adjusted gross income (AGI) can be deducted in 2022.
• Charitable donations: The deductions for charitable donations are not as generous as they were in 2021. In 2022, the annual income tax deduction limits for gifts to public charities1 are 30% of AGI for contributions of non-cash assets—if held for more than one year—and 60% of AGI for contributions of cash.
• Miscellaneous deductions: No miscellaneous itemized deductions are allowed.

The traditional IRA and Roth contribution limits in 2022 remain the same as the prior year. Individuals can contribute up to $6,000 to an IRA, and those age 50 and older also qualify to make an additional $1,000 catch-up contribution. If you’re able to max out your IRA, consider doing so—you may qualify to deduct some or all of your contribution.

However, the 2022 contribution limits for 401(k) accounts have increased to $20,500. If you’re age 50 or older, you qualify to make an additional $6,500 catch-up contribution for this tax year as well.

Modified AGI limit for traditional IRA contributions. For 2022, if you are covered by a retirement plan at work, your deduction for contributions to a traditional IRA is reduced (phased out) if your modified AGI is:

If you either live with your spouse or file a joint return, and your spouse is covered by a retirement plan at work but you aren’t, your deduction is phased out if your modified AGI is more than $204,000 but less than $214,000. If your modified AGI is $214,000 or more, you can’t take a deduction for contributions to a traditional IRA.

Modified AGI limit for Roth IRA contributions. For 2022, your Roth IRA contribution limit is reduced (phased out) in the following situations.

To be eligible for an HSA, you must be enrolled in a high-deductible health plan (which usually has lower premiums as well).

Health savings account (HSA): For 2022, the maximum you can contribute to an HSA is $3,650 for an individual (up $50 from 2021) and $7,300 for a family (up $100). People aged 55 and older can contribute an extra $1,000 catch-up contribution.

Educator Expense Deduction : elementary and secondary school teachers are allowed an adjustment to income of $300 as an above-the-line adjustment to income for the 2022 tax year.

The following tax provisions expired on December 31, 2022, and cannot be claimed on any 2022 tax returns:

• Health Coverage Tax Credit (Form 8885)
• Private Mortgage Insurance Deduction (PMI)  
• Tuition and Fees Deduction
• Sick Leave and Family Leave for the Self-Employed (Form 7202)
• Charitable Contributions for nonitemizers (taxpayers who itemize their deductions can still claim the charitable deduction). For tax year 2022, you can no longer claim the deduction for donations up to $300 ($600 married filing jointly)  

These are just a few of the changes to the US tax laws in 2022 that may affect individual tax returns. It’s important to review the laws and consult with a tax professional if needed to determine how they may impact your specific tax situation.